As the Federal Reserve raised the federal funds rate for the seventh time in 2022, with more to come in 2023, the economic outlook going forward is anyone’s guess.
The Federal Reserve raised the federal funds rate by 50 basis points on Wednesday — a reprieve from several other higher rate hikes in 2022. You know the bar is set low when you call a rate increase of 50 basis points a reprieve, but that’s what seven Fed rate hikes in one year will do to a country.
Are the rate increases working? The Fed uses rate increases to slow down economic growth, which makes it more expensive for consumers and businesses to take on credit. That deters consumers and businesses from spending, reducing demand for goods and services and, therefore, prices. Consumers will be paying more to repay debt. Higher interest rates mean any debt you take on now and in the new year will be more expensive than it would have been a year ago. That includes new and variable rate loans like mortgages, auto, personal, as well as credit card debt. Having more expensive existing debt will likely carve into consumers’ excess savings and could deter them from spending.
Listen now and subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | RSS Feed | Omny Studio Employment strength persists. When you slow down demand, it also often means people lose their jobs and wage growth slows, but neither of those have happened yet. In fact, the U.S. jobs market is doing phenomenal: The economy added more jobs than expected in November and key indicators — the labor force participation rate, quit rate and job openings — have remained steady.
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